Tech Today: Tesla’s Meeting, Arista’s New Thing, Twitter’s Virtues

Shares of Tesla (TSLA) are up $14.19, or 5%, at $305.32, after Chief Executive Elon Musk yesterday remarked at the company’s annual shareholder meeting that the company is “quite likely” to reach a goal of making 5,000 of its Model 3 sedan per week, by the end of this month, as related by Reuters’s Alexandria Sage and Noel Randewich.

Commenting on that annual meeting, Ben Kallo with R.W. Baird this morning reiterates an Outperform rating on Tesla shares, and a $411 price target, writing that the “body language was positive” at the meeting.

He notes that the shareholders "approved Board of Directors nominations by a significant margin, which we believe provides a vote of confidence in management,” as well as approving all the proposals of the board, including the continued combination of Musk’s CEO and chairman roles.

Micron in the Voting Machine

Shares of Micron Technology (MU) are down 73 cents at $58.68, after Joe Wittine of Longbow took over coverage today of the stock from departing colleague Mike Burton, and slapped a Neutral rating on the shares, writing that the stock is most likely to be treated by the short-term "voting machine" of the market rather than "weighing machine," as the classic rule of thumb goes.

"While DRAM fundamentals are excellent and valuation is at trough as the cycle peaks (6x FY19 EPS, 7x FY19 FCF), we expect the normalization in the DRAM cycle to create some drag on in investor sentiment," writes Wittine.

"We see parallels between today's DRAM setup and the mid-2017 peak of the NAND cycle, which have kept the shares of WDC (for example) range bound since, and could repeat for DRAM/MU until investors become comfortable with the down cycle’s trajectory."

"We could become more constructive on the shares with either a valuation pullback toward $50/share to improve the risk/reward profile further, or an unexpected improvement in industry fundamentals."

Twitter in the S&P 500

Shares of Twitter (TWTR) are up 14 cents at $39.94, after Argus Research’s Jim Kelleher this morning reiterated a Buy rating, and raised his price target to $50 from $40, writing that its upcoming inclusion in the S&P 500 index should prompt increased fund manager interest.

"Inclusion in the S&P 500 means that every index mutual fund and ETF, as well as technology sector funds and ETFs, must acquire the stock," he notes.

"According to ETF.com, 14 ETFs directly track the market-cap weighted S&P 500; three of these funds alone total about $500 billion in assets. There are also funds that track derivative strategies (such as 'smart beta) built around the S&P 500."

Kelleher, moreover, thinks that "Twitter deserves its inclusion in the elite index."

"Among the social media pioneers, a few have disappeared or become irrelevant (Myspace) and some have been acquired (LinkedIn)," he observes, while "the acquisition of Instagram and increasing video content on Facebook have muddied distinctions between that platform and Snapchat."

"As a self-described 'platform for public self-expression and conversation in real time,' Twitter, after some early stumbles, has reasserted itself as an indispensable forum in the global social media scene.

Kelleher adds that his "blended valuation for Twitter has now reached the low $60s and is climbing."

Defending Ambarella

Shares of chip maker Ambarella (AMBA) are down $6.25, or almost 13%, at $43.14, after the company yesterday afternoon reported fiscal Q1 revenue of $56.9 million and EPS of 13 cents, topping consensus of $56 million and 9 cents, but missed with its outlook for this quarter, projecting revenue in a range of $60 million to $64 million, below consensus of $68 million.

Ambarella’s video-processing chips are most often associated with the adventure cameras of GoPro (GPRO), and with driverless cars.

Management told the Street its business selling chips to security cameras, especially to China, continues to be strong, but the sports-camera market of GoPro continues to be a drag.

Defending the company this morning, Cowen & Co.’s Matthew Ramsay reiterates an Outperform rating, and a $65 price target. As he cuts his estimates — down to $263 million in revenue this year from a prior $293 million estimate — he writes that the financial outlook has now been “de-risked."

Shares of networking technology vendor Arista Networks (ANET) are up $3.48 at $278.23 after the company yesterday announced it is offering new network switches that use a novel form of programmable chip from Barefoot Networks, a startup based in Santa Clara, not far from Arista’s San Jose offices.

The Barefoot chips are designed to be more programmable than traditional switching chips from Broadcom (AVGO), which dominates the switching silicon market. I profiled Barefoot, along with another young switch chip hopeful, Innovium, last month.

In response to the announcement, Alex Henderson with Needham & Co. is enthusiastic, reiterating a Buy rating on Arista stock, and a $315 price target, and writing that the new switches can help Arista further expand “in the edge market” within data center networking, and “take additional share from Cisco [Systems (CSCO)].” The switches could offset some of the unevenness Arista has seen in its main market selling the most powerful switches to cloud-computing operators, muses Henderson.

"Arista is one of the first to utilize Barefoot's Tofino P4-programmable chips,” notes Henderson. "This enables flexible deployments across multiple environments at an attractive list price of just $1200/100G port for the 64x100G system."

"We believe Arista's ability to utilize any chip in its switches as a key differentiator as well as the best programmability on the market."

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